Conclusive Evidence Clause

The High Court has held that a conclusive evidence clause in a deed purporting to be an indemnity indicated that the liability of the indemnifier under the deed was a primary liability – the deed was therefore an indemnity, not a guarantee.

The court’s decision is significant because it is common for both guarantees and indemnities to include a conclusive evidence clause, that is, a clause that provides that any certificate presented to the guarantor/indemnifier by the beneficiary, certifying the amount due to it by the primary obligor, will be conclusive evidence of that amount in the absence of “manifest error”.

The court also held that a conclusive evidence clause would be of no value if a full trial were allowed to examine the details of the enforcement and validity of each factored debt in order to determine whether a certificate of indebtedness issued under the clause was manifestly wrong. It distinguished the facts of this case from those in North Shore Ventures Ltd v Anstead Holdings Inc [2011] EWCA Civ 230 in which the Court of Appeal took a “wider approach” to the issue of whether a certificate of indebtedness issued under a conclusive evidence clause is manifestly wrong.

Finally, the court found that where a current account is maintained by a factor for transactions under an invoice discounting agreement, the factor can be considered to have suffered a loss only at the point at which it demands immediate payment of the outstanding balance in the account from the company under the agreement.